The Office of Fair Trading (OFT) has struck a deal with UK banks, who have agreed to make the cost of current accounts more transparent and the switching process more reliable.
The OFT’s announcement comes after its 2008 study, which identified three major problem areas in the £8bn a year current account market. These were:
• the transparency of the cost of current accounts to consumers;
• the real and perceived difficulties with switching current accounts;
• the way in which unauthorised overdraft charges function.
To improve the transparency of current account costs, providers have agreed to introduce an annual current account summary for consumers. This is intended to help individuals work out whether their bank offers good value for money.
In addition, any charges applied to consumers’ current accounts will be made more prominent on monthly statements to ensure people are aware of the fees they pay.
Current account providers have also undertaken to provide their customers with average credit and debit balances. This information should be a useful tool for consumers trying to work out which bank account is best for them, as some deals are more appropriate for those who are regularly overdrawn while others reward high in-credit balances.
Banks have also agreed to produce illustrative scenarios for consumers, which will help explain unarranged overdraft charges more clearly. Examples will show how using your current account in certain ways could result in extra costs – and how high these fees are likely to be.
Switching your current account
Current account providers have also been working with Bacs, the payment processor, to improve the efficiency of the switching process.
Steps will be taken to reduce the problems that some consumers experience with transferring Direct Debits, and measures will be introduced to reduce the impact of these problems.
A new consumer guide and website will also be launched in an effort to increase people’s awareness of the automatic switching process. In addition, the OFT’s Consumer Direct website will be hosting new advice and tools that should help consumers compare and understand the cost of current accounts.
Bank overdraft charges
Meanwhile, the OFT’s work on unarranged overdraft charges continues. The Supreme Court is expected to hand down its judgment on whether these fees can be assessed for fairness very soon.
Although the Financial Services Authority (FSA) has put a hold on bank charges refunds until the final verdict in the test case has been heard, it is still worth putting in your claim now – especially if you’re in financial difficulty. Read the full for more information.
Martyn Saville, money expert at Which? says: ‘These changes do sound like a step in the right direction, and it’s to be hoped that the crucial issue of unfair bank charges is soon resolved in favour of consumers.
‘However, the key question is how long some of the agreed improvements to the current account market will take to deliver. While the OFT says it expects some of the changes to be made by the second quarter of 2010, the introduction of annual current account summaries and enhanced monthly information may take until 2011.
‘This is a blow to consumers, who have already been waiting far too long for a fair deal from their banks.’ If you want to search for a better current account today, check out our independently researched Which? Best Buys.
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